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TMI Blog2012 (11) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... r:- M/s.Helios and Matheson Information Technology Limited, Chennai-17, (hereinafter refereed to as H & M Ltd.) is a Public Limited Company and the petitioners herein are its Former Chairman and present Managing Director respectively. M/s.vMoksha Technologies Ltd. (in short 'VMT') is a non-resident Unit in Mauritius, Port Blair. In order to expand its business activities, H & M Ltd. entered into a Sale Purchase Agreement (in short 'SPA') on 11.05.2005 with VMT at Mauritius to acquire 100% of its shares for US$ 13.5 Million with an understanding that the consideration will be first transferred by H & M Ltd. to VMT whereupon, the transferred amount will be re-transferred to H & M Limited who, in turn, will issue redeemable preference service shares of H & M Ltd. in favour of VMT, Mauritius and those shares will be redeemed after 18 months from the date of issue. Consequent to the agreement, VMT, Mauritius, deposited the Original Share Certificates and the Share Transfer Forms duly signed with the agents/Escrow as per the terms of the SPA. The petitioner-H & M Limited secured the approval from Foreign Investment Promotion Board for the said investment in non-convertible preference s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst them alleging commission of serious offences of fraud. Inasmuch as the successive Management of VMT Mauritius alleged fraud in the transaction in question and highlighted the same in the complaint made to the RBI, by letter dated 28.08.2007, the RBI requested the respondent-Department to examine and investigate the issue for necessary action, which resulted in search of the office premises of the petitioners on 12.03.2008 and during such search, incriminating documents were said to have been seized and statements of the individuals recorded including that of the Branch Manager of the State Bank of Mauritius (SBM) at Chennai, who is said to have stated that the petitioners furnished guarantees only to the SBM at Mauritius. Ultimately, after conclusion of the investigation, a show cause notice, dated 21.01.2010, came to be issued against the petitioners stating that they have contravened the provisions under Section 6 (3) (j) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 3 of the Foreign Exchange Management (Guarantees) Regulation 2000 to the extent of US$ 13.5 million equivalent to Rs.58,37,75,193/- in having stood as guarantors for obtaining the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation, ultimately declined to accept the same and, by the proceedings challenged herein, imposed a penalty of Rs.5 lakhs each on the petitioners herein. 3. Mr. R. Krishnamurthy, learned Senior Counsel appearing for the petitioners, in an arduous endeavour to whittle down the vigour of the impugned order, studiously contended by advancing the following submissions:- (i) The petitioners herein did not stand as guarantors for any non-resident but the letter of comfort-guarantee was given only to a resident of India. Generally, if a person guarantees re-payment of a loan availed of by a borrower, the guarantor would also execute the loan agreement along with the borrower, whereas, in the case on hand, the loan agreement, dated 28.06.2005, executed by VMT in favour SBM, Mauritius, would depict that the borrower alone had executed the loan agreement and the petitioners had never executed the agreement along with the borrower as guarantors. The lien and guarantee on the part of the petitioners did not pertain to the loan granted by the SBM at Mauritius but pertains to petitioners' account with SBM at Chennai Branch, which is not a non-resident. Under such circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion to impose huge penalty on the petitioners declining to accept the explanation offered, before passing the impugned proceedings, should have issued a fresh show-cause notice as provided under Section 4 of the Rules and afforded all reasonable opportunities to substantiate the defence, however, it seems that the authority had already made up his mind to hold against the petitioners and such attitude on the part of statutory authorities should be depreciated. (v) In Harbanslal Sahnia v. Indian Oil Corpn. Ltd. (AIR 2003 SC 2120), it has been categorically held that rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion and that, in an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies viz., (a) where the writ petition seeks enforcement of the Fundamental Rights; (b) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. In the light of the above case law, the respondents cannot ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the dates given were 14.07.2010 and 16.07.2010. If the petitioners were really looking for an ample opportunity, despite the explanation offered by them, by availing the opportunity of personal hearing fixed on 14.07.2010 and 16.07.2010, either personally or through counsel, they could have effectively projected their pleas and claims, rather, they simply addressed a letter dated 15.07.2010 so vaguely stating that there was no need for them to any more attend the enquiry as the matter could be decided based on the explanation. Thus, the authority, conscious of the fact that the High Court had fixed an outer-limit for disposal of the petitioners' case on the basis of the explanation, proceeded therewith, assessed and dealt in detail with each of the objections made and ultimately, passed the impugned order and in the said order, clear discussion has been made to hold that only the provisions under Section 6(3)(j) of the Act is applicable to the issue in question. Referring to Section 35 of the FEMA which provides that any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained with HSBC Bank, the sum was credited to the VMT's account with the SBM at the Mauritius Branch. The said complaint received by the RBI was forwarded to the respondent-Directorate for enquiry and investigation and on the basis of the materials collected, both oral and documentary, it was found that even though the present transaction between a resident in India/petitioners and a non-resident/VMT at Mauritius falls only under the specified class of permissible capital account transaction in terms of Section 6(2) of FEMA, the same is regulated in terms of Regulation of FEM (Guarantees) Regulation, 2000 issued under Section 6(3)(j) of FEMA. 7. Even though at the first instance after completion of the investigation, the petitioners were issued with a show cause notice on 21.01.2010 and a detailed explanation was offered along with a letter, dated 01.07.2010, from their Counsel to the effect that there was no need to have an enquiry at all, the petitioners did not choose to appear for the personal hearing scheduled on 12.07.2010, rather, they chose to file the writ petitions as mentioned above with an emphatic allegation that the principles of natural justice have been flagra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent in the light of the detailed explanation offered on 01.07.2010, to effectively defend their case and substantiate the claim and pleas now raised as to the applicability of Section 6(2) of FEMA to the complete exclusion of Section 6(3) (j) and the Regulations issued thereunder. It must also be pointed out here that when the petitioners themselves requested this Court that they would be satisfied if a mere direction is issued to consider their claim in the light of the explanation offered, the presumption would be that they only required a decision at the hands of the authority based on the explanation offered and that in the event of an adverse order, they would resort to the further course of remedy as provided under the statute. Therefore, in the subsequent proceedings now adjudicated by this Court, they are estopped from raising the plea of compliance to the principles of natural justice as provided under Rule-4 of the Rules. If they were cautious and conscious enough, in the letter, dated 15.07.2010, sent to the Directorate by the petitioners through their counsel, they could have emphasised that in the event of their case being considered negatively, they may be giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is still holding the field. 38. Again in Titaghur Paper Mills Co. Ltd. and another vs. State of Orissa and another [AIR 1983 SC 603] in the background of taxation laws, a three judge Bench of this Court apart from reiterating the principle of exercise of writ jurisdiction with the time-honoured self-imposed limitations, focused on another legal principle on right and remedies. In paragraph 11, at page 607 of the report, this Court laid down: "It is now well recognized that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Water Works Co. v. Hawkesford [1859] 6 C.B (NS) 336 at page 356 in the following passage: "There are three classes of cases in which a liability may be established founded upon statute.... But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it...the remedy provided by the statute must be followed, and it is not competent to the party to pursue the course a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be right in citing the said decision if the circumstances herein are similar to that of those involved in Ratan's case, but in the present case, what is under challenge is an appealable order and therefore, when an appealable order is passed, particularly when the facts are in dispute, the writ petition filed under Article 226 of the Constitution of India without availing alternate remedy is not maintainable. Further, in the very same decision in Raj Kumar Shivhare's case, there is an answer to the argument of the learned Senior Counsel by placing reliance on Seth Chand Ratan's case in the following text :- 44. Therefore, principle laid down in the Ratan's case (supra) applies in the facts and circumstances of this case. If the appellant in this case is allowed to file a writ petition despite the existence of an efficacious remedy by way of appeal under Section 35 of FEMA this will enable him to defeat the provisions of the Statute which may provide for certain conditions for filing the appeal, like limitation, payment of court fees or deposit of some amount of penalty or fulfilment of some other conditions for entertaining the appeal. (See para 13 at page 408 of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion confers a right of appeal on any person aggrieved. A right of appeal, it is well settled, is a creature of Statute. It is never an inherent right, like that of filing a suit. A right of filing a suit, unless it is barred by Statute, as it is barred here under Section 34 of FEMA, is an inherent right (See Section 9 of the Civil Procedure Code) but a right of appeal is always conferred by Statute. While conferring such right Statute may impose restrictions, like limitation or pre-deposit of penalty or it may limit the area of appeal to questions of law or sometime to substantial questions of law. Whenever such limitations are imposed, they are to be strictly followed. But in a case where there is no limitation on the nature of order or decision to be appealed against, as in this case, the right of appeal cannot be further curtailed by this Court on the basis of an interpretative exercise. Under Section 35 of FEMA, the legislature has conferred a right of appeal to a person aggrieved from `any' `order' or `decision' of the Appellate Tribunal. Of course such appeal will have to be on a question of law. In this context the word `any' would mean `all'. 15. In similar circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the argument of the learned Senior Counsel for the petitioners that the instant case is an exceptional case where this Court can proceed with the matter, I am of the considered opinion that such exercise would only turn out to be futile since there exist many disputed questions and further, none of the 3 elements as enumerated in Hanbanslal Sahnia's case is present herein to treat the present case otherwise. 17. In the light of the foregoing discussion, I hold that the present writ petition is not maintainable and accordingly, the same is dismissed. However, the petitioners are at liberty to file an Appeal before the AFTE, if they so desire, and in that event, the appellate authority shall not raise any objection to entertain the appeal on the ground of limitation since the matter was pending on the file of this Court. However, in respect of other relevant conditions such as payment of court fees, deposit of penalty or fulfilment of any other conditions for entertaining the Appeal, it is for the AFTE to decide on such issues. It is made clear that in view of the peculiar circumstances involved in the given case, while exercising its vast powers under Section 28 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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